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Brazil-based drugstore operator, RaiaDrogasil, reports 15.3% revenue growth to BRL4.2bn (US$1.1bn) in the quarter from 1st January 2019 to March 31st 2019.

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GPA has announced consolidated sales growth of 12.4% for Q1, despite an unfavourable Easter calendar effect. It also reported same-store sales (SSS) growth of 7.5% and said that it had seen its strongest customer traffic growth in several periods.

GPA has been optimising its store portfolio for all its multivarejo (all non-cash and carry formats) stores to better meet changing customer demands. Since it began converting stores to its new banners SSS have increased. In Q1 SSS were up by 4.8% and market share gains were seen at all multivarejo banners.

GPA’s evolving portfolio

Source: GPA

Revitalising Extra Hiper stores leads to improved sales performance  

Many underperforming Extra Hiper stores were converted to the Assaí banner and sales at these stores more than doubled as a result. The Extra Hiper estate is now performing well (+2.7% SSS in Q1) due to various promotional campaigns and growth in non-food sales. We anticipate that the number of Extra Hiper conversions into Assaí will begin to slow and future Assaí openings will be mostly organic new stores.

Solid performance of Pão de Açúcar’s latest G7 store design

In Q1 the Pão de Açúcar banner delivered SSS growth of 4.6%, versus 2.2% in Q4 2018. Since the start of 2018 GPA has remodelled 26 Pão de Açúcar stores, of which 20 have been converted to its new G7 design.

The G7 stores have a stronger focus on health-food and providing an enhanced customer experience. The layout and product mix have been revitalised, with fresh produce brought to the front of the store. They also feature a new health-food zone, which brings together healthy products from multiple categories into an area adjacent to the fresh produce. This makes it simpler for customers to navigate and purchase healthier products.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Sales at these stores are significantly outperforming the average sales of Pão de Açúcar overall and the sales now account for c. 25% of gross sales for the banner. GPA plans to convert between 10 and 15 stores to the G7 concept in 2019.

Mercado Extra and Compre Bem delivering double-digit sales growth

In Q1 GPA converted seven Extra Super stores to its Mercado Extra banner and since the start of 2018, 13 have been converted to the Compre Bem banner. As a result, sales growth across the three banners (Extra Super, Mercado Extra and Compre Bem) have increased from 4.7% in Q4 2018 to 7% in Q1 2019. GPA said that Mercado Extra and Compre Bem stores are delivering double-digit growth in sales, customer traffic and sales volume.

Source: IGD Retail Analysis

Compre Bem stores have a wider selection of perishables than was previously available in the Extra Super banner. The stores have a discount-oriented pricing strategy and target social classes B, C, D and E.  Compre Bem stores fulfil the role of the regional supermarket and the product mix is flexed to suit local catchments.

Source: IGD Retail Analysis

he stores have an average of c. 7k SKUs compared to an average of 12k SKUs in an Extra Super. Having fewer SKUs releases sales-floor space which is used to incorporate services such as a butcher and a bakery. Adding these services has been positively received by customers and the stores that have been converted to Compre Bem have increased sales by c. 50%.

Source: IGD Retail Analysis

Same-store sales growth of 20% for proximity banners

Same-store sales for GPA’s proximity formats grew by 20% in Q1. The business has reported consistent double-digit sales growth since the second half of 2018.

A combination of initiatives, including adjustments to its product assortment, aligning promotions to those in larger store formats and a stronger focus on its private label offering is growing sales volume and customer traffic. In Q1 GPA converted two Mini Extra convenience stores into its Minuto Pão de Açúcar banner, which is thought to be the better performing banner.

Source: IGD Retail Analysis

Gross sales at Assaí increase 26% year-on-year

Gross sales for the Assaí banner were 25.6% higher in Q1 2019 than in Q1 2018 and the banner saw a 10.7% growth in same-store sales. Gross revenue reached BRL$6.9bn (US$1.7bn), up by BRL$1.4bn (US$353M) year-on-year (YOY).

GPA will continue its rapid expansion of the Assaí banner, with plans to open 20 Assaí stores in 2019. The business opened one Assaí store in Q1, which was an Extra Hiper conversion located in the North of São Paulo city.

GPA driving expansion in private label

At the end of 2018 GPA announced ambitious plans to increase private label from 10% of its total offer to 20%. Private label penetration is now 11.6%. GPA has c. 3,000 private label SKUs, of which 90 were launched in Q1. GPA plan to launch a further 500 products in 2019.  

Source: IGD Retail Analysis

Growing ecommerce capabilities and the launch of James Delivery

GPA is the market leader in Brazil’s food ecommerce channel. It said its online food sales now account for 4% of Pão de Açúcar’s gross sales.

GPA’s improved ecommerce performance in Q1 was partly driven by expanding its ‘Express’ and ‘Click & Collect’ delivery services across the country. Online order collection services are now available in 76 stores nationwide and GPA aims to implement this at a further 40 stores by the end of 2019.

In April 2019 GPA launched ‘James Delivery’, a multiservice last-mile app which offers fast delivery of products sold across GPA’s supermarkets and drug stores, as well as food from participating restaurants. For now, the service is limited to São Paulo and Curitiba. GPA’s Extra Hiper store in the Itaim Bibi neighbourhood is being used to train staff in how to use the technology. The business aims to have the James Delivery service available in 10 cities by the end of 2019.   

Source: GPA

Loyalty programmes gaining traction

18.5m customers are currently registered to one of GPA’s various loyalty programmes. Loyalty card penetration at Pão de Açúcar stores is c. 85% and c. 60% for Extra stores.  

GPA’s loyalty and customisation tools “My Discount” and “My Rewards” are seeing higher penetration. In Q1 there were 8.3m downloads of the My Discount app, which was a 62% quarter-on-quarter increase (70% increase versus Q1 2018). GPA said the average monthly spend by app users is double that of non-users.

In the quarter 100,000 new customers signed up to Assaí’s Passai credit card, which enables them to pay wholesale prices on single product purchases and allows delayed payment for up to 40 days. 720,000 customers have a Passai card, which was launched in 2017. Compared to other formats, penetration is currently low, at 5%, but steadily growing. As more customers sign up to the card, the business will be able to better utilise the sales data for targeted promotions and range optimisation.

Source: IGD Retail Analysis

Newly launched initiatives are helping to differentiate its offer

GPA has strategically partnered with local food tech start-up Cheftime, to offer meal-kit solutions in the Pão de Açúcar banner. The kits contain simple, healthy meal kits, which serve two. These are currently available in a few stores in São Paulo. The business aims to roll this offer out to 25 Pão de Açúcar and three Minuto Pão de Açúcar stores in 2019.

Source: IGD Retail Analysis

The business has also recently launched Pão de Açúcar Adega, an online platform for selling wine/alcohol. The platform has nationwide coverage and has a differentiated assortment of 1,200 SKUs of wine, 200 SKUs of spirits and 150 beer brands. This new initiative helped sales in the wine category to double in Q1.

As well as the online platform, GPA recently opened a physical Adega store in the Jardins neighbourhood in São Paulo. Store staff are trained by an external wine expert. Although at its infancy, this initiative seems like a good opportunity for the business to diversify and further showcase its commitment to quality and service.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Source: IGD Research

Source: IGD Retail Analysis

Oliver Butterworth

Oliver Butterworth

Retail Analyst - Latin America

We look at five themes, including the growth of discounters and the continued strength of the atacajero format, that are set to shape the region's grocery markets in 2019 and beyond. With case studies from Brazil, Colombia and Mexico, amongst others, and retailers like Carrefour, GPA and Walmart, the presentation highlights the challenges and opportunities the region is expected to provide manufacturers in the short term. 

In this round-up we share our key highlights and trends that impressed us over the last few months in the course of our store visits. Within this report we present examples from retailers in a number of markets including Sainsbury's, Aldi, Lidl, Kroger and many more.

See the latest industry news on Latin America.

Carrefour Brazil’s gross sales for Q1 2019 rose by 9.9% to BRL14.2bn (US$3.6bn), despite an unfavourable Easter calendar effect. Like-for-like (LFL) sales were up 6.6%, the best LFL performance since Q1 2017.

Sales were boosted by the solid performance of Carrefour's Atacadão cash and carry format, as well as four new openings in the banner. The higher annual food (6.5% in Q1 2019 vs. 4.1% Q1 2018) also contributed to the improved sales.

Third quarter of double-digit sales growth for Atacadão

Atacadão's gross sales grew by +13.6% to BRL9.5bn (US$2.4bn). This is the third consecutive quarter that Carrefour has posted double-digit sales growth for the Atacadão format.

LFL sales grew by 6.8% for Q1. This was a similar LFL performance to Q4 2018, but significantly higher than Q1 2018 (+0.5%).

According to Carrefour, sales grew across all categories and the average ticket grew significantly in Q1. The most notable sales increase was for commodities, such as rice and beans, due to their competitively low prices versus other formats.

Same-store sales (SSS) for Carrefour's main estate grow by 2.6% quarter-on-quarter

Despite the -3% impact of Easter calendar effect, Carrefour's main estate saw an accelerated LFL sales growth of 6.1% in Q1, with total sales of BRL4.7bn (US$1.2bn) (excluding fuel).

SSS increased from 3.5% in Q4 2018 to 6.1% in Q1 2019. Several factors contributed to the improved SSS, including; better LFL sales in proximity formats (Express and Market), a solid ecommerce performance as a result of developments in its omnichannel strategy (more below), and hypermarket's non-food sales and health-food initiatives. 

New health food initiatives help to drive increased sales performance

Carrefour's improved LFL performance in its hypermarkets can be partly attributed to the success of its health food initiatives. Carrefour has recently launched ‘Healthy Corridors’ in half of its hypermarkets (available in 49 stores by end of March 2019). This initiative led to a 24% sales increase in health food categories in Q1 and the business hopes to increase this to 32% by the end of 2019.

Source: IGD Retail Analysis

Sales of organic products grew by an average of 67% in Q1 vs. 2018, with the business hoping to also increase this to 85% by the end of 2019. Carrefour plans to do this by expanding the organic assortment, working with new suppliers and intensifying promotions through the My Carrefour app.

Carrefour is reformulating and relaunching various health food products later this year, to improve their nutritional content. Lastly, following the recent launch of its global ‘Act for Food’ programme, which aims to support customers and employees to eat better at more affordable prices, Carrefour has now launched a dedicated Act for Food website for shoppers in Brazil.

Source: Carrefour

Source: IGD Retail Analysis

Ecommerce is the fastest growing channel in Q1

Ecommerce was Carrefour's highest growth channel in the quarter. Gross Merchandise Volume (GMV) saw a 13% growth in Q1 (as Ebit), with an 84% increase in sales. GMV sales accounted for 11% of Carrefour’s total sales (excluding fuel), significantly up from 6% in Q1 2018.

The number of visitors, orders and the average ticket price all continue to grow. Website sales increased by 58% in Q1 2019 versus Q1 2018. Marketplace sales tripled and accounted for 23% of total GMV. The number of partners (c. 2,000 now vs. 134 in Q1 2018) and SKU’s (1.9mn registered at the end of March) continue to grow rapidly.

Rappi partnership is helping to attract new customers

Rappi was launched at the end of January and is already available in 56 stores across 13 cities. Since launching Rappi sales have been increasing at an average rate of +10% each week. In Q1 Rappi sales accounted for c. 35% of Carrefour's total ecommerce food sales.

Around half of Rappi orders are from new Carrefour customers. Carrefour plans to increase its geographical coverage in the coming months.

An overview of Carrefour’s three expanding banners…

In 2019 Carrefour plans to open 20 Atacadão and 20 to 30 proximity stores across its Carrefour Market and Carrefour Express banners.

Carrefour Express

Carrefour Brazil’s Express stores are between 100-200m2 and target on-the-move shoppers in metropolitan areas looking for quick purchases.

Source: IGD Retail Analysis

Stores carry an average of 2,600 SKUs and is predominantly focused on drinks (including alcohol), snacks and ambient grocery, with a small selection of fresh produce. In some stores customers can also buy freshly made sandwiches and coffee-to-go. These, alongside additional services such as basic banking/bill payment and parcel collection, help to drive additional footfall.                                                   

Source: IGD Retail Analysis

Since launching the banner in 2014 Carrefour has opened 122 Express stores, all of which are in São Paulo. The format is performing well and recorded double-digit LFL sales growth in Q1.

Carrefour said it plans to accelerate the expansion of the Express format in the medium-term. In Q1 Carrefour opened just one Express store (no Carrefour Markets), so we expect the number of openings to increase in the coming months.

There is the potential for this format to be a success in Brazil’s other major cities, although Carrefour has not announced plans to extend outside of São Paulo for now.

Carrefour Market

Carrefour's latest proximity banner 'Carrefour Market' was launched in December 2017. It had opened 10 stores under the banner by the end of 2018. The 10 stores are predominantly located in out-of-town centre and high-income residential areas.

Source: IGD Retail Analysis

The stores are bigger than Carrefour's Express format, ranging from 400m²-500m². Whilst the Express stores target on-the-move customers in central locations, Carrefour Market fulfils a neighbourhood mission, enabling customers to perform a two to three day or top-up shop without having to travel to a larger supermarket or hypermarket.

We recently visited two Carrefour Markets in São Paulo. The stores had a modern design with distinctive bright coloured fixtures and displays. Compared to the Express format, Market has a wider selection of fresh produce, a meat counter and a variety of ready-made meal solutions. It also offers more regional products and a dedicated health-food section.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

According to Carrefour, the stores have been very popular with customers and are performing well. We expect Carrefour to open a similar number of stores to the 10 opened in 2018.

Atacadão

Atacadão is Carrefour's key growth format in Brazil. In 2018 Carrefour decided to quicken the pace of its opening programme from c. 11-12 stores per year to 20. This has had a positive effect on Carrefour's sales performance and, as such, the business plans to open a further 20 stores in 2019. Carrefour opened four Atacadão stores in Q1 so this plan is currently on track.

Source: Carrefour

The success of the cash and carry format lies in its offering of individual branded items at prices closer to wholesale and selling staple foods - such as rice and beans - in bulk, at a lower cost than supermarkets.

Source: IGD Retail Analysis

Many Brazilian customers who shop in cash and carry formats have migrated their shop from hypermarkets. It will be interesting to see if cash and carry stores can retain these customers if the economy continues to improve.

Oliver Butterworth

Oliver Butterworth

Retail Analyst - Latin America

We look at five themes, including the growth of discounters and the continued strength of the atacajero format, that are set to shape the region's grocery markets in 2019 and beyond. With case studies from Brazil, Colombia and Mexico, amongst others, and retailers like Carrefour, GPA and Walmart, the presentation highlights the challenges and opportunities the region is expected to provide manufacturers in the short term.

In this round-up we share our key highlights and trends that impressed us over the last few months in the course of our store visits. Within this report we present examples from retailers in a number of markets including Sainsbury's, Aldi, Lidl, Kroger and many more.

See the latest industry news on Latin America.

France-based Casino has reported first quarter results saying same-store sales rose 3.0% at a Group level. A flat performance in its home market, with same-store sales, including Cdiscount, contracting by 0.1%, was offset by its performance in Latin America, especially Brazil.

Casino highlights ‘strong growth in buoyant segments’ in France

Casino reported total sales in France fell by 3.3%, to €4.4bn, while organic growth contracted by 1.5% and same-store sales, excluding Cdiscount, were flat at 0.0%. Its performance was affected by store closures, with it noting the closure of 109 Leader Price stores over the last 12 months, and the continuing effects of the protests at the end of the year.

Casino said that its performance was aided by its focus on ‘buoyant segments’, saying that sales of organic products had risen 11% in Q1, with food ecommerce sales up by 11% too. By banner, Casino said:

Monoprix: its performance was aided by a rise in customer traffic, of 1.7%, with net sales of organic products up by 9.7% and food ecommerce sales rising by 11.8%. The latter figure was helped by its partnership with Amazon, which covers all of Paris and 35 border towns;

Franprix: on the positive side, Casino said customer traffic rose by 2.0%, while sales of organic and catering products were up by 4.8% and 12% respectively. The retailer said the roll out of the Bibi digital loyalty programme continued, which it said reinforced ‘the personalisation of the offer in real time’;

Géant hypermarkets: food sales continued to perform well, on a same-store basis, with sales of organic products, which rose 7.4%, and ecommerce sales, which increased by 11.2%, helping overall results. Casino noted the positive impact from the roll out of “…le drugstore parisien” store-in-store concept at three stores.

At its other banners, Casino noted, again, the strong sales of organic products, roll out of digital initiatives and the benefit of further franchising within its convenience store operations.

Cdiscount boosted by sales through its marketplace

Casino said at Cdiscount, its GMV (gross merchandise volume) including taxes rose 6.1% on a reported basis and by 9.2% on an organic basis. While direct sales fell by 3.0%, this was more than offset by an 11.7% rise in sales through its marketplace. The growth in sales through its marketplace meant that the channel accounted for 35.8% of total sales at the end of Q1 2019, versus 32.6% at the end of Q1 2018.

Same-store sales rise by 6.0% in Latin America

Casino said in Latin America same-store sales rose 6.0%, while organic sales were up by 11.4%. This was boosted by the performance of its Brazil-based GPA division, where same-store sales were up by 7.1% and organic sales rose by 13.8%. It said this was aided by ‘the continuous very good performance of Assaí, where same-store and organic sales rose by 10.3% and 25.8% respectively.

The retailer said a positive performance was recorded across its banners, with ‘double-digit growth in sales, customer traffic and volumes’ at its new Compre Bem and Mercado Extra formats, while Pão de Açúcar was aided by a ‘good performance’ at renovated “G6” and “G7” stores. In the online channel, food sales were aided ‘by the expansion of click & collect and express delivery services’.

Casino said Éxito Group had ‘delivered a good performance’ in the first quarter and would report its results in May.

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Presentations

25/06/2019
We visited one of GPA's latest stores which has been remodelled to its new G7 concept. One of 20 stores opened in this format in 2018, the store has a new layout and product mix which focuses on fresh and healthy categories.
19/06/2019
As it looks to pivot away from its largest stores in France, get closer to shoppers and integrate its channels in all market where it operates, Casino is investing heavily in its proximity stores globally. For retailers, therefore, it is a source of inspiration of how they could evolve their convenience store operations. For manufacturers, Casino provides a view on how the channel could develop and how they may need to prepare in future.
04/06/2019
This figures-based deck summarises the forecast for the Latin American grocery market to 2023 and comes complete with a dataset.
View all presentations

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This in-depth guide to Brazil explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

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